South Korea's KOSPI index has experienced a massive 44% crash from its June peak, dropping nearly 13% to 5,263 on Wednesday and comfortably remaining in technical bear market territory. According to The Economic Times, the index has fallen from its June peak of 9,386, marking a 44% plunge amid global AI growth worries and foreign fund outflows. Despite the sharp pullback into bear market territory, Nomura projects up to 109% upside potential, setting a 10,000-11,000 target driven by corporate share buybacks, strong AI earnings, and governance reforms. The recent crash has made South Korea's stock market the face of the global AI rout after a skyrocketing rally, though it continues to be Asia's best performer in 2026 so far. Nomura's bullish view implies 90-109% upside potential from the current 5,262.77 level, with the brokerage citing structural demand sources and policy developments as key catalysts for the next rally.
The sharp selloff in South Korea's stock market was driven by heavy selling by foreign investors as Korea's benchmark weight exceeded portfolio limits, slowing institutional support, alongside rapid growth in leveraged ETFs and newly launched single-stock leveraged products sparking massive volatility. As reported by The Economic Times, Nomura highlighted that these structural factors have created new sources of demand that should help the Kospi re-rate toward its 10,000-11,000 target. The brokerage believes that key policy developments could include tighter regulations of single-stock leveraged ETFs, publication of a low-PBR company list, incentives for higher dividends, stricter duplicate-listing rules and KOSDAQ reform. However, corporate stock buybacks falling short of expectations, foreign investors' mechanical selling exacerbating once the KOSPI reaches above 7,500-9,000, and retail investors' rebuilding of steep leverage were listed as key downside risks to Nomura's bullish view.
Asian stock markets swung lower on Wednesday after an early advance lost momentum, with heavy selling in South Korea and Japan dragging regional sentiment lower. According to NDTV Profit, trading in South Korea was briefly suspended for around 20 minutes after losses accelerated, with the KOSPI tumbling 7.84%. Japan's Nikkei 225 declined 1.08% and China's Shanghai Composite slipped 0.54%, while Australia's ASX 200 rose 0.99% and Hong Kong's Hang Seng Index gained 1.51%. Markets opened on a firmer footing before sentiment deteriorated through the session, erasing the initial gains as the sharp decline in Korean equities prompted the temporary trading halt. The abrupt reversal highlighted growing caution among investors, who continue to assess the combined impact of geopolitical tensions, elevated energy prices and uncertainty over the global interest-rate outlook.
Nvidia's latest collection of agreements, reportedly worth more than $750 billion, has sharpened concerns that the funding chain has become increasingly circular. As reported by Investing.com India, this marks one of Nvidia's largest funding deals of the AI boom. The company is also in discussions with OpenAI to provide a guarantee of as much as $250 billion to help the latter lease computing from a US data center project. Nvidia is also working on AI-led deals worth another $750 billion, including a $500 billion announcement with the SK Group. Jefferies equity trader Jeffrey Favuzza noted that "We're not entirely new to this circular financing debacle," but expressed uncertainty about how the market will react to such deals. The fall in Nvidia meant that Apple ended Monday's trading session as the world's most valuable company, highlighting the significant impact of semiconductor sector weakness on major technology stocks.
The Federal Reserve is due to meet this week, with markets pricing in a roughly 36.3% probability of a 25 basis points rate hike by the FOMC on Wednesday night, according to the latest CME FedWatch tool. According to Citadel Securities, the US Fed may deliver a surprise rate hike this week, in-line with new Fed Chair Kevin Warsh's price stability pledge. A rate hike this week would not only establish the credibility of the new Fed Chair, but also reiterate the Fed's independence, according to Citadel. This will be a busy week, with "plenty of reasons to cut risk if anyone played a short term bounce last week," Natixis Advisors portfolio manager Jack Janasiewicz said. Market participants will continue tracking the Fed's policy announcement, developments in the Middle East and volatility across Asian equities to gauge whether Wednesday's sharp reversal signals a broader shift in investor sentiment.
Geopolitical developments also remained on investors' radar, with the U.S. military intercepting multiple ballistic missiles launched by Iran toward American forces stationed in the Middle East. As reported by Reuters, the heightened tensions contributed to a sharp rise in crude oil prices, with oil climbing more than $2 per barrel in early trading after data showed shrinking U.S. crude inventories. Global chip weakness weighs on sentiment as investor caution ahead of major U.S. technology earnings from Microsoft and Amazon also contributed to market uncertainty. Despite the broader weakness, select stocks posted strong gains following earnings announcements, with factory automation specialist Keyence surging 15.42% after reporting robust quarterly results.
